** Archived Item **
Archived items are provided as an historical record. This article may not reflect current provisions.
Helping Members Understand the Value of a HOOPP Pension
To better reflect HOOPP’s pension promise, the member annual statements that were rolled out this year focused on the deferred pension amounts in the termination section and the commuted value (CV) was removed.
It’s important to recognize that HOOPP member annual statements show only the benefits that members will receive.
A CV is something that only comes into play if a member dies before retirement or decides to transfer her benefits out of the Plan when she terminates.
The CV isn’t available to members who retire – members can’t opt for a lump sum. Only the pension is a guaranteed benefit.
While the CV can fluctuate when interest rates change, HOOPP pensions are based on a formula and are paid out regardless of any ups and downs in the market or instability in interest rates. Since the purpose of the annual statement is to provide members with an estimate of the retirement benefits that will be payable to a member in the future, the decision was made to remove the CV and simply show the deferred pension amounts in the termination section.
Remember that the commuted value doesn’t play a role in calculating a member’s future HOOPP benefits. It’s basically the amount of money required today to provide a member with her entitlements in the future.
But there’s still a way a member can estimate the value of his or her pension in today’s dollars. To figure out approximately what the value of a pension is, a member should look at the deferred pension amount shown in the “Your Options at Termination” section of the statement.
Let’s look at the example of Mary:
The approximate value of Mary’s annual pension would be the quoted monthly deferred pension multiplied by 12 months. Let’s say a deferred pension of $2,000 per month is shown on her statement – that’s $24,000 per year. If Mary retired at 65 and lived until 81, she would be retired for 16 years. To get a rough idea of the total value of the pension payments, Mary would multiply the annual pension of $24,000 by 16, to get a total of $384,000. Please note, this doesn’t include any potential future inflation adjustments.
If a member is close to retirement and would like an estimate for dates other than those shown on his or her statement, the member can fill out the Member Request for Estimates form to get a clearer idea of what that pension will be.
Alternatively, the member can use HOOPP’s pension calculator to get estimates for any date he or she would like.
Summer 2007
